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Metro lifts earnings despite challenging macroeconomic environment

Sales in the first three quarters reach € 47.2 billion (-0.6%; in local currency: -0.2%)

Positive sales trend in Germany (adjusted for store divestments)

Metro Cash & Carry lifts sales in local currency by 1.4%

Earnings forecast 2011 further specified: Around 10% growth remains achievable if Christmas business is considerably better; on the back of normal Christmas business, growth at least in line with market expectations of 5%

METRO GROUP significantly lifted its operating earnings (EBIT) before special items by 16.5 percent to € 1,066 million in the first three quarters 2011. During the same period, sales at METRO GROUP dropped by 0.6% to € 47.2 billion. In local currency, sales were only slightly down from the prior-year value by 0.2%. With these figures, METRO GROUP was able to maintain its sales volume despite various unfavourable developments. "We again significantly increased our earnings despite a challenging macroeconomic environment. This attests to the economic strength of METRO GROUP", said the CEO of METRO AG, Dr. Eckhard Cordes. "As announced, we can also again report a positive earnings trend at Media-Saturn. The further expansion of the online business will also boost sales".

From January to September 2011, sales generated by METRO GROUP dropped 0.6% to € 47.2 billion (9M 2010: € 47.5 billion). In local currency, sales were only slightly down from the prior-year value by 0.2%. The sales trend was impaired by various effects. These include reluctant consumer spending due to the difficult macroeconomic situation in Western Europe, the European currency crisis, negative currency effects in Eastern Europe, store closures, the divestment of unprofitable business areas, a trading-down to more attractively priced own brands, the curbing of promotion activities at Media-Saturn as well as the targeted phasing out of unprofitable product categories at Metro Cash & Carry and Galeria Kaufhof.

Sales in the third quarter 2011 came down 2.0% to € 16.0 billion (in local currency: -0.7%). In addition to the high comparable basis the development of sales was also affected by the divestment of Saturn France and Metro Cash & Carry Morocco.

In Germany, sales generated during the period from January to September 2011 were 1.3% down year-on-year. Here, too, the high prior-year basis and store closures showed their effects. Adjusted for the store closures, sales came in above the year-earlier level. In the third quarter, sales receded slightly by 0.5%.

In Western Europe, sales generated during the period from January to September 2011 dropped by 2.6% to € 14.8 billion (in local currency: -3.2%). In the third quarter, sales declined by 4.5%. The difficult macroeconomic environment affected in particular consumer electronics sales.

Sales in Eastern Europe during the period from January to September 2011 grew by 1.0% to € 12.1 billion. However, this trend was dampened by adverse currency movements. In local currency, the sales growth was more pronounced coming in at +2.9%. In the third quarter, sales dropped by 2.3%, but were up 2.0% in local currency. Especially the negative sales trend in Poland prevented stronger growth. Sales in Russia, by contrast, continued to report double-digit growth.

Asia/Africa remained the region with the strongest sales growth. Sales generated during the period from January to September 2011 climbed significantly by 11.4% to € 2.2 billion and in local currency even by +15.8%. In the third quarter, sales rose 5.9% (in local currency: +12.1%).

Sales METRO GROUP
(in € billion)

9M 2010

9M 2011

Change

Change in local
currency

Sales

47.5

47.2

-0.6%

-0.2%

Germany

18.3

18.0

-1.3%

-1.3%

Western Europe (excl. Germany)

15.2

14.8

-2.6%

-3.2%

Eastern Europe

12.0

12.1

1.0%

2.9%

Asia/Africa

2.0

2.2

+11.4%

+15.8%

From January to September 2011, EBIT before special items soared 16.5% to come in at € 1,066 million. Before special items, earnings before tax improved by 14.0% to € 557 million. The net profit for the period before special items reached € 334 million (+5.0%). The net profit for the period (adjusted for special items) attributable to the shareholders of METRO AG climbed to € 227 million following.

€ 176 million during the year-earlier period. Earnings per share before special items went up 11.1% to € 0.90.

Before special items

Adjusted for special items

Earnings METRO GROUP
(in € million)

9M 2010

9M 2011

9M 2010

9M 2011

EBIT

915

1,066

794

972

Earnings before tax

489

557

368

463

Net profit for the period

318

334

229

266

Earnings per share

0.81 €

0.90 €

0.54 €

0.69 €

Outlook

METRO GROUP confirms its revised sales forecast for financial year 2011 and expects sales (adjusted for portfolio changes) to come in above the prior-year level. This guidance is issued on the assumption of a distinct pick-up of sales in the fourth quarter and of no further adverse exchange rate developments. Furthermore, it is assumed that the fiscal policy measures to stabilise public budgets in our major sales markets will have been largely implemented.

METRO GROUP remains confident that it will be able to achieve an earnings growth before special items of around 10% for the full year (basis: EBIT before special items 2010: € 2,415 million). However, this target involves increased risks. These risks include the rising uncertainty resulting from the European sovereign debt crisis and the weakening economic growth. Moreover, achieving the earnings target presupposes that Christmas trading turns out to be distinctly better than last year. In 2010, it had been affected by adverse weather conditions, among others. Irrespective of this, METRO GROUP continues to expect that the Shape measures will further unfold their positive effects in the fourth quarter. That is why, even if Christmas trading should turn out to be normal as compared to the weak prior-year basis, METRO GROUP continues to expect 2011 earnings to grow at least in line with current market assumptions of 5%.

Development of the business segments

Metro Cash & Carry delivers sales growth, also like-for-like

From January to September 2011, sales at Metro Cash & Carry grew by 0.4% to € 22.6 billion (in local currency: +1.4%) during the period. Compared against the prior-year basis, sales growth was affected by the market exit from Morocco. Adjusted for Moroccan sales, sales growth amounted to 1.1%. The share of own brands rose significantly by 15.6% (9M 2010: 13.1%). Sales in the delivery business grew dynamically by more than 40% to € 1.2 billion. In the third quarter 2011, sales of Metro Cash & Carry receded by 1.2% to € 7.7 billion mainly due to currency effects; in local currency, sales were up by 0.9%. In July 2011, eight countries launched the pilot project Customer Centricity where individual locations are granted additional entrepreneurial responsibility to be able to better address the regionally different needs of professional customers.

In Germany, sales generated during the period from January to September dropped by 3.1% to € 3.7 billion on the grounds of store divestments last year, but reached the prior-year level on a like-for-like basis. The low-margin business with tobaccos and telephone cards was further phased out. Adjusted for these product categories, like-for-like sales went up by 2.1%. To promote the important delivery business, a new regional delivery hub started operations in the Ruhrgebiet.

From January to September 2011, sales in Western Europe dropped by 0.8% to € 8.6 billion (in local currency: -0.7%). In Eastern Europe, sales grew in a very inconsistent market environment by 1.4% to € 8.3 billion (in local currency: +3.1%). While sales in Poland and Romania continued to recede, Russia again reported a double-digit sales growth. Sales in Asia/Africa climbed by 8.7% to € 2.0 billion (in local currency: +13.4%). Here, the market exit from Morocco was significantly offset by strong sales growth in Asia. Save for Japan, all countries in this region were able to report a double-digit, like-for-like growth rate.

EBIT before special items rose by € 47 million to € 569 million (9M 2010: € 522 million) during the first nine months of 2011. This earnings rise is mainly owed to margin improvements in the framework of Shape 2012. Also adjusted for special items EBIT climbed distinctly by € 70 million to € 527 million.

Metro Cash & Carry

9M 2010
(in € billion)

9M 2011
(in € billion)

Change

Change in local
currency

Sales

22.5

22.6

0.4%

1.4%

Germany

3.8

3.7

-3.1%

-3.1%

Western Europe (excl. Germany)

8.6

8.6

-0.8%

-0.7%

Eastern Europe

8.2

8.3

1.4%

3.1%

Asia/Africa

1.8

2.0

8.7%

13.4%

EBIT (before special items)

€ 522 million

€ 569 million

€ 47 million

Real Germany increases like-for-like sales and earnings

From January to September 2011, sales of Real declined by 1.7% to € 8.1 billion (in local currency: -1.2%). In the third quarter, like-for-like sales reached the prior-year level.

In Germany, sales generated during the period from January to September 2011 came in 1.3% below the year-earlier value at € 6.0 billion due to store divestments. Like-for-like, sales grew by 0.5%. This trend improved further in the third quarter with sales growing 0.7% like for like. The measures to boost productivity were implemented further. The share of own brands grew to 15.0% (9M 2010: 14.4%). Roughly 75% of the German store network comprising 316 locations has been remodelled since 2007. The Real web shop now offers more than 10,000 articles and reports around 1.5 million visitors every month, with a clearly upward trend. Real's multichannel strategy is now complemented by a second independent Real Drive location which was opened in Cologne in early October. Also since October, Real customers have to opportunity to shape the assortment via the online rating portal for own brand products. Sales in Eastern Europe dropped by 2.8% to € 2.1 billion, primarily due to currency effects. In local currency, sales were down 0.8%. Third quarter sales in local currency came in even above the prior-year level.

EBIT before special items improved by € 38 million to € 13 million and was thus positive already after the first nine months (9M 2010: € -25 million). Also adjusted for special items, EBIT improved by € 46 million to € 5 million (9M 2010: € -41 million).

Real

9M 2010
(in € billion)

9M 2011
(in € billion)

Change

Change in local
currency

Sales

8.2

8.1

-1.7%

-1.2%

Germany

6.0

6.0

-1.3%

-1.3%

Eastern Europe

2.2

2.1

-2.8%

-0.8%

EBIT (before special items)

€ -25 million

€ 13 million

€ 38 million

Media-Saturn raises earnings in third quarter

In a challenging macroeconomic environment, sales of Media-Saturn dropped by 1.1% to € 14.0 billion (in local currency: -1.5%) during the period from January to September 2011. Overall, however, Media-Saturn further extended its strong market position in many European countries. Online sales including those of the online retailer Redcoon acquired in March 2011 amounted to € 169 million (9M 2010: € 43 million). Sales of Redcoon were for the first time consolidated in the third quarter and amounted to € 106 million. Compared to the year-earlier quarter, a 25% sales rise was reported (Q3 2011 vs. Q3 2010).

In Germany, sales climbed by 0.9% to € 6.3 billion during the period from January to September 2011. The third quarter showed a distinct improvement. Sales grew by 3.6%, mainly due to the first-time consolidation of Redcoon. Like for like, sales grew by 0.2% despite the lower intensity of promotion activities. The measures initiated to raise the price profile are showing first effects. Demand focused in particular on white goods, flat screen TVs and notebooks. Also customer demand for own brand products is on the rise. In Cologne, the Saturn store on Hansaring reopened with one of the world's largest entertainment departments covering a sales floor of 3,000 square meters. In addition to the web shop saturn.de, which was launched in October, also the music streaming service JUKE has been available online already since September. Against remuneration, JUKE offers legal access to an extensive music library of around 13 million songs and is promoted by Saturn.

In Western Europe, the challenging macroeconomic environment led to a tangible drop in sales. During the period from January to September 2011, sales declined by 5.4% to € 6.0 billion. In addition, also the divestment of the French consumer electronics stores effective on 30 June 2011 caused a drop in sales. In the third quarter, the consumer electronics sector environment continued to weaken. Especially in Spain, Portugal and Italy this resulted in a noticeable decline in consumer spending. On the bright side, sales grew in Belgium and the Netherlands.

In Eastern Europe, sales rose by 4.3% to € 1.7 billion and in local currency by even 6.8% during the period from January to September 2011. Like for like, however, sales receded due to the continued buying restraint on the part of consumers.

In Asia, sales in the first three quarters amounted to € 61 million. In Shanghai, the fourth Media Markt was opened. Customer feedback continues to be extremely positive.

EBIT before special items reached € 163 million (9M 2010: € 246 million). Adjusted for special items, EBIT dropped to € 157 million (9M 2010: € 241 million). In the third quarter, EBIT before special items climbed from € 124 million to € 141 million. This earnings improvement reflects the first positive effects from the measures taken to optimise costs as well as the missing operational losses in France. Earnings were sufficient to offset the start-up losses in China as well as the higher costs for the implementation of the multichannel strategy.

Media-Saturn

9M 2010
(in € billion)

9M 2011
(in € billion)

Change

Change in local
currency

Sales

14.2

14.0

-1.1%

-1.5%

Germany

6.2

6.3

0.9%

0.9%

Western Europe (excl. Germany)

6.3

6.0

-5.4%

-6.8%

Eastern Europe

1.6

1.7

4.3%

6.8%

Asia

-

€ 61 million

-

-

EBIT (before special items)

€ 246 million

€ 163 million

€ -83 million

Galeria Kaufhof continues assortment optimisation

During the period from January to September 2011, sales of Galeria Kaufhof declined by 3.3% to € 2.3 billion. In the third quarter, sales dropped by 6.3% against a strong year-earlier basis.

In Germany, sales dropped by 4.1% to € 2.1 billion during the period from January to September 2011. The unseasonable cold weather in July and August affected the sale of summer clothes while the unusually warm temperatures prevailing upon the presentation of the autumn and winter collections resulted in a significant buying restraint. In view of the high share of textiles sales, Galeria Kaufhofwas not able to escape this trend. Moreover, many Galeria Kaufhof department stores decided to give up the low-margin media departments in favour of extending core assortments offering strong gross earnings such as fashion, accessories and beauty. Business was affected by the ensuing remodelling work. The new online shop of Galeria Kaufhof was launched on 7 October 2011. In Western Europe, by contrast, sales climbed significantly by 3.6% to € 0.2 billion.

EBIT before special items reached € -40 million (9M 2010: € -27 million). Adjusted for special items, EBIT came in at € -55 million (9M 2010: € -27 million).

Galeria Kaufhof

9M 2010
(in € billion)

9M 2011
(in € billion)

Change

Sales

2.4

2.3

-3.3%

Germany

2.2

2.1

-4.1%

Western Europe

0.2

0.2

3.6%

EBIT (before special items)

€ -27 million

€ -40 million

€ -13 million

Real Estate: METRO PROPERTIES places second real estate fund in Italy

The Real Estate segment comprises all real estate assets as well as real estate-related services of METRO GROUP. As at 30 September 2011, METRO GROUP owned 680 locations (31 December 2010: 688). During the third quarter, 20 Italian locations of the sales division Metro Cash & Carry were transferred to a closed real estate fund named "M Due" and the fund shares were then completely sold to institutional investors.

EBIT before special items climbed to € 520 million (9M 2010: € 401 million). Adjusted for special items, EBIT reached € 513 million following € 399 million one year earlier. Owing to the real estate transaction in Italy, Q3 EBIT before special items climbed significantly from € 131 million to € 245 million.

Key financials Q3 2011

Sales

Q3 2010
(in € billion)

Q3 2011
(in € billion)

Change

Change in local
currency

METRO GROUP

16.3

16.0

-2.0%

-0.7%

Metro Cash & Carry

7.8

7.7

-1.2%

0.9%

Real

2.7

2.7

-1.8%

-0.5%

Media-Saturn

4.8

4.7

-2.3%

-2.2%

Galeria Kaufhof

0.8

0.8

-6.3%

-6.3%

EBIT before special items

Q3 2010
(in € million)

Q3 2011
(in € million)

Change

METRO GROUP

445

614

37.9%

Metro Cash & Carry

252

276

9.7%

Real

1

24

-

Media-Saturn

124

141

12.9%

Galeria Kaufhof

7

-9

-

Real Estate

131

245

87.6%

METRO GROUP is one of the largest and most international retailing companies. In 2010 the Group reached sales of around € 67 billion. The company has a headcount of some 283,000 employees and operates more than 2,100 stores in 33 countries. The Group's performance is based on the strength of its sales brands which operate independently in their respective market segment: Metro/Makro Cash & Carry - the international leader in self-service wholesale, Real hypermarkets, Media Markt and Saturn - European market leader in consumer electronics retailing, and Galeria Kaufhof department stores.